Earnings Preview: Adidas, Kate Spade, Crocs

Adidas Group

Adidas had been on a bit of an earnings rollercoaster ride during the past year, but the past two quarters signaled that the brand was regaining some momentum.

In Q2, Adidas’ revenues saw a 15 percent rise, to $4.3 billion, boosted by double-digit growth in Western Europe, Greater China and MEAA (Middle East, Africa, and Asia Pacific). Adidas brand and Reebok were also up on a reported basis. However, the struggling TaylorMade Golf unit continued its downward spiral — declining 26 percent — causing CEO Herbert Hainer to signal that the group may be exploring divestiture of the division.

Net income at Adidas grew 1.4 percent year-over-year, to 146 million euros, or $161 million, based on the average currency exchange rate for the period, while earnings per diluted share were .72 euros, or 77 cents, an increase of 6 percent from the year-ago quarter.

After releasing the biggest lifestyle and running shoes this year — the Yeezy Boost 350 and the Ultra Boost — as well as signing NBA superstar James Harden to a $200 million deal, insiders say the firm’s third quarter and remainder of the year could prove to be brighter.

Adidas reports Q3 on Nov. 5.

Kate Spade & Co.

After posting a net loss in Q1, Kate Spade & Co. saw a profit in its second quarter, ended July 4, 2015. The handbag maker saw impressive comp growth of 10 percent and 12 percent (excluding e-commerce) but still missed Wall Street’s estimates for profits and revenues.

Reported net sales for the second quarter of 2015 were $281 million, an increase of 5.7 percent, from the comparable 2014 period.

The company has become a Wall Street darling in recent quarters as many market watchers favor its business mix over those  of  its competitors in the current retail landscape.

Citi Research analyst Kate McShane, in August, added the firm to her Focus List and ranked it her top 2H15 pick for apparel and footwear names.

Kate Spade’s 2Q report gave it further credibility that demand remains strong despite a promotional pullback, and that Kate Spade is not seeing slowness in the market,” McShane wrote. “We believe Kate has strong comp momentum, productivity upside, significant margin expansion potential and has been able to successfully pull back on promotions.”

The company will report Q3 on Nov. 5.

Crocs Inc.

Analysts have been mixed on Crocs since it last reported. Most recently, Sterne Agee CRT analyst Sam Poser downgraded the company’s stock rating — previously a top pick for the market watcher — to neutral, seeing “few catalysts to move the stock in the near term, though we believe in the turnaround plans laid out by management at its recent investor day.”

During its investor day, on Sept. 30, investors reacted negatively — driving down the firm’s share price — after management lowered its guidance for revenues in the third quarter, to $270 million to $280 million, from the prior range of $280 million to $290 million.

CEO Gregg Ribatt had said that while he is proud of what the firm has accomplished to date, “there is significant work to be done.” The full impact of Crocs’ efforts, Ribatt noted, would surface in the shipment and sell-throughs for the spring and summer ‘16 line — the first developed by the new team.

Regarding Q3, Crocs said it expects approximately $6 million of shipment holds in China in the quarter.

In Q1, the firm announced a series of senior-level organizational changes, including the elimination of the COO role — most recently held by Scott Crutchfield — and the SVP of global-supply chain, as well as the addition of an SVP of global sourcing, Phil Blake, and the promotion of Dennis Sheldon to SVP of global distribution and logistics. Then, in mid-September, Crocs promoted Terence Reilly to SVP and CMO. Before that, on Sept. 8, Jeff Lasher, SVP and CFO since 2011, resigned to accept the CFO role at West Marine Inc.

In its most recent quarter, Q2, the firm’s revenues and profits continued to decline. Profits sank 43 percent year-over-year, to $13.4 million, while revenues decreased 8.2 percent (reported), to $346 million.

Crocs will report Q3 on Nov. 5.


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